Wells Fargo "Stumpf's" The Market
We told you we would expose Wells rosy report later, here it is...
and much like last quarter, laced with arsenic for investors that ignored the fine print, read it and weep, if you bought in that is.
Wells Fargo, #2 mortgage lender; CEO John Stumpf: "Wells Fargo continued to strengthen its franchise during the second quarter."
Revenue +16%; and thats about it... now for the declines and negative increases.
Net profit & EPS -23%; their 3rd straight quarterly decline. Core deposits declined 5.1% $310 vs $327 billion.
Profit retail banking -18%; wholesale business banking -10%; Wells Fargo Financial posted a $38 million loss.
Loan originations -21%; mortgage apps -12%; pipeline -16%; real estate originations Yoy -36%; auto loans -40%;
government and agency products = 95% of Q2 originations, Thanks Fannie & Freddie.
Credit loss provisions +318% $3 billion vs $720 million; net charge offs doubled $1.51 billion vs 720 million; YTD $3 vs 1.4 billion;
non performing assets doubled $5.23 vs 2.7 billion. Allowance for credit losses $7.52 vs 6.01 billion
90 days or more past due and still accruing $7.26 vs 6.92 billion;
includes $5.48 billion in GNMA/FHA/VA GUARANTEED advances. Thanks Ginnie.
Ex GNMA 90 day past due $1.780 vs 1.631 billion.
Short term borrowings +111% Yoy $86 vs $40 billion. Private collateralized mortgage obligations +589% Yoy $22.4 vs 3.8 billion
Unrealized net losses on securities available for sale were $2.1 billion vs $598 million.
Approximately 38% of our $73 billion core Home Equity portfolio and 71% of our $11 billion liquidating Home Equity portfolio had combined loan-to-value ratios above 90%.
Page 33: The liquidating portfolio shrank to $11 vs $11.5 billion; % loss was 3.46% or $380 million.
Page 17: Interesting codicil: the mortgages held for sale category has shrunk -27% Yoy $25.2 vs 34.5 billion while
the securities available for sale has increased +27% Yoy vs $91 vs 72 billion. But those don't equal each other, or do they, at the Fed window?
Mortgages for sale -9.3 billion; + mortgages in liquidation portfolio 11 billion; = 20.3 billion...
securities from the window +19 billion; get the drift. Thanks Bennie.
Net gains on mortgage loan origination/sales activities increased $609 million linked quarter due to wider margins...
and an increase in the servicing value of the mortgage warehouse/pipeline. These improvements were largely driven by higher interest rates.
Okay, higher interest rates and lower Fed window rates yielded wider margins.
Despite real estate volumes -36%; non interest income (fees) from mortgage banking +74% $1.197 billion vs $689 million. Thanks Bennie.
Second quarter results included a $65 million net reduction in the value of the mortgage servicing rights (MSRs)
from market-related valuation changes, net of hedge results (reflected in net servicing income). Only a $65 million net reduction? Lets investigate...
Page 30: Changes in fair value of MSR's due to changes in valuation model or assumptions:
+4.132 vs -1.798 billion for a quarterly swing from $14.956 to $19.333 billion.
Page 31: Net derivative losses from hedges -$4.197 billion vs +$1.892 billion.
Isn't it convienient that the MSR's went up almost exactly to cover what the hedges went down? Thus netting a paltry $65 million loss.
FYI, subjective FASB 159 profit for level 3 mortgages held for sale is NOT mentioned in the press release.
The Bottom Line: Q108, were it not for $1.9 billion in derivative gains, and $974 million is subjective FASB 159 profit,
Wells would have booked a Q108 $1.2 billion loss.
Q208, we need look no further than a $6 billion swing: +$4.132 billion in subjective MSR valuation to cover up -$4.197 billion in derivative hedge losses.
Stumpfed again? Net income of $1.8 billion? Certainly NOT. Cutting estimated FASB 159 "profit" in half to $500 million and meet me half way...
on the $6 billion MSR valuation swing with +$1 billion rather than +$4 billion,
swings Q208 profit from +1.8 billion to an actual loss of $1.7 billion...
For a more accurate picture of Wells demise, consider the 20/20 rule as explained in Underwater Nation...
Total Assets $610 billion; Loans $400 billion x 20% = $80 billion valued @ .80% =$64 billion, therefore loans = $384 billion and Total assets = $594 billion.
Total liabilities = $561 billion + stock holder equity $48 billion = $609 billion.
Assets = $594 vs $609 billion in liabilities means, much like Fannie & Freddie; Wells Fargo is technically insolvent.
Could there be a "restatement" upon filing of the actual 10Q? The hole is getting deeper for Stumpf and company, how long can they prolong the inevitable?
We sincerely hope that Wells stock holders are keeping track, so that they will have recourse after Stumpf and his henchmen...
bolt for the door during the "good times" with their lofty bonuses, only to have the accounting irregularities discovered much later.
and much like last quarter, laced with arsenic for investors that ignored the fine print, read it and weep, if you bought in that is.
Wells Fargo, #2 mortgage lender; CEO John Stumpf: "Wells Fargo continued to strengthen its franchise during the second quarter."
Revenue +16%; and thats about it... now for the declines and negative increases.
Net profit & EPS -23%; their 3rd straight quarterly decline. Core deposits declined 5.1% $310 vs $327 billion.
Profit retail banking -18%; wholesale business banking -10%; Wells Fargo Financial posted a $38 million loss.
Loan originations -21%; mortgage apps -12%; pipeline -16%; real estate originations Yoy -36%; auto loans -40%;
government and agency products = 95% of Q2 originations, Thanks Fannie & Freddie.
Credit loss provisions +318% $3 billion vs $720 million; net charge offs doubled $1.51 billion vs 720 million; YTD $3 vs 1.4 billion;
non performing assets doubled $5.23 vs 2.7 billion. Allowance for credit losses $7.52 vs 6.01 billion
90 days or more past due and still accruing $7.26 vs 6.92 billion;
includes $5.48 billion in GNMA/FHA/VA GUARANTEED advances. Thanks Ginnie.
Ex GNMA 90 day past due $1.780 vs 1.631 billion.
Short term borrowings +111% Yoy $86 vs $40 billion. Private collateralized mortgage obligations +589% Yoy $22.4 vs 3.8 billion
Unrealized net losses on securities available for sale were $2.1 billion vs $598 million.
Approximately 38% of our $73 billion core Home Equity portfolio and 71% of our $11 billion liquidating Home Equity portfolio had combined loan-to-value ratios above 90%.
Page 33: The liquidating portfolio shrank to $11 vs $11.5 billion; % loss was 3.46% or $380 million.
Page 17: Interesting codicil: the mortgages held for sale category has shrunk -27% Yoy $25.2 vs 34.5 billion while
the securities available for sale has increased +27% Yoy vs $91 vs 72 billion. But those don't equal each other, or do they, at the Fed window?
Mortgages for sale -9.3 billion; + mortgages in liquidation portfolio 11 billion; = 20.3 billion...
securities from the window +19 billion; get the drift. Thanks Bennie.
Net gains on mortgage loan origination/sales activities increased $609 million linked quarter due to wider margins...
and an increase in the servicing value of the mortgage warehouse/pipeline. These improvements were largely driven by higher interest rates.
Okay, higher interest rates and lower Fed window rates yielded wider margins.
Despite real estate volumes -36%; non interest income (fees) from mortgage banking +74% $1.197 billion vs $689 million. Thanks Bennie.
Second quarter results included a $65 million net reduction in the value of the mortgage servicing rights (MSRs)
from market-related valuation changes, net of hedge results (reflected in net servicing income). Only a $65 million net reduction? Lets investigate...
Page 30: Changes in fair value of MSR's due to changes in valuation model or assumptions:
+4.132 vs -1.798 billion for a quarterly swing from $14.956 to $19.333 billion.
Page 31: Net derivative losses from hedges -$4.197 billion vs +$1.892 billion.
Isn't it convienient that the MSR's went up almost exactly to cover what the hedges went down? Thus netting a paltry $65 million loss.
FYI, subjective FASB 159 profit for level 3 mortgages held for sale is NOT mentioned in the press release.
The Bottom Line: Q108, were it not for $1.9 billion in derivative gains, and $974 million is subjective FASB 159 profit,
Wells would have booked a Q108 $1.2 billion loss.
Q208, we need look no further than a $6 billion swing: +$4.132 billion in subjective MSR valuation to cover up -$4.197 billion in derivative hedge losses.
Stumpfed again? Net income of $1.8 billion? Certainly NOT. Cutting estimated FASB 159 "profit" in half to $500 million and meet me half way...
on the $6 billion MSR valuation swing with +$1 billion rather than +$4 billion,
swings Q208 profit from +1.8 billion to an actual loss of $1.7 billion...
For a more accurate picture of Wells demise, consider the 20/20 rule as explained in Underwater Nation...
Total Assets $610 billion; Loans $400 billion x 20% = $80 billion valued @ .80% =$64 billion, therefore loans = $384 billion and Total assets = $594 billion.
Total liabilities = $561 billion + stock holder equity $48 billion = $609 billion.
Assets = $594 vs $609 billion in liabilities means, much like Fannie & Freddie; Wells Fargo is technically insolvent.
Could there be a "restatement" upon filing of the actual 10Q? The hole is getting deeper for Stumpf and company, how long can they prolong the inevitable?
We sincerely hope that Wells stock holders are keeping track, so that they will have recourse after Stumpf and his henchmen...
bolt for the door during the "good times" with their lofty bonuses, only to have the accounting irregularities discovered much later.
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